RES developers face expenses for project pre-development. These include measuring the availability of the resource (e.g. wind speeds, solar irradiation), environmental impact assessments, geological surveys, grid connection issues, and more. Depending on how the An auction is a market mechanism with the aims of allocating... More is designed, auctioneers must pre-develop their project to differing degrees before they can enter it into an An auction is a market mechanism with the aims of allocating... More.
The costs for pre-development are sunk costs, meaning that they will not be recovered by the project developer. This is obvious in the case of projects which are not awarded: The installation will not be built, and the pre-development was thus in vain. However, the same can be true even of awarded projects: Assuming sufficient competition, rational bidders will not include past costs in the calculation of their bid price. Even An auction is a market mechanism with the aims of allocating... More winners therefore do not recover their pre-development costs.